Tax deductions are expenses that your business has encountered throughout the year. You use deductions to reduce the taxable income that your business has had throughout the year – thus allowing you to pay less in taxes at the end of the year.
Two Kinds of Deductions
For some deductions, you take the entire value of the deduction at one time; while others you take a portion of the deduction over several years. For example, you may take a deduction of $40 for vinyl you recently purchased. However, since you will continue to use your machine throughout several years, your machine depreciates and you take smaller deductions over the useful life of your machine.
Common Tax Deductions in Your Silhouette or Cricut Business
- Supplies – Vinyl, paper, glue, transfer tape, weeding tools, blank products, and so on.
- Machines – Cameo, Curio, Mint, Cricut, Alta, Glowforge, heat press, postage scale or printer, computer you purchased for business use, or camera and related photography equipment.
- Software – Like Silhouette Studio Designer or Business Edition Upgrade, fonts, and designs.
- Books – Any book you’ve purchased to better your business or to improve your skills (like Diving In: 30 Days to Your Silhouette Business – shameless plug to one of my books).
- Insurance – Business insurance.
- Event Entry Fees – Like those from craft shows or fairs.
- Home Office Overhead – The space in your home you use for your business, internet, electricity, water.
- Legal Fees – These include attorney fees from setting up your business, trademarking your designs, registering copyrights.
- General Office Supplies – These would include envelopes, tape, pens, pencils, tacks, staples, file folders, and so on.
- Postage and Shipping Supplies – Don’t forget about boxes, envelopes, tape, packing peanuts, bubble wrap, and labels.
- Advertising Expenses – Including promoted listings on Etsy, Pinterest, Facebook, Google Adwords, and print materials including business cards or post cards.
- Tax Preparation Expenses
- Accounting Expenses – Including monthly accounting subscription, or the costs related with hiring an accountant.
- Phone expenses – Cell phone bills, phone, phone apps for your business.
- Travel Expenses – You can deduct things like gas, lodging, food.
- Start Up Costs – Usually, you can deduct up to $5,000.
- Credit Card Processing Fees
- Display Materials and Photography Props
- Charitable Donations – This includes product donations for fundraisers.
- Health Insurance Premiums
- Childcare Expenses.
- …most things that you have purchased for use in your business can be taken as a tax deduction.
Whew, that’s a lot of deductions! When taking deductions related to your Silhouette or Cricut business, the IRS will not ask for copies of each receipt. However, you are required to keep your receipts on file, either digitally or hard copies. Personally, I keep paper records in binders.